Chinacast Education Corporation (OTCMKTS:CAST) disclosed on 19th April, that it has received legal notice from the law firm of Rosen intimating it of the commencement of class action suit on behalf of its impacted share holders. The class action is being initiated on behalf of those share holders who bought into the stock during the four year period of 2009 to 2012. The suit has been brought in front of the District Court of New York Southern District.

Case In Front Of New York Southern District Court

The law firm has dragged the audit house of Deloitte Touche Tohmatsu CPA Ltd. (“DTTC”) into the class action along with Chinacast Education Corporation (OTCMKTS:CAST) and has raised questions on the legality of the audit firm’s certification that the Shanghai based education firm had used properly established, accounting and auditing standards to report its numbers to investors. The complaint also alleges that Deloitte Touche Tohmatsu CPA Ltd. (“DTTC”) falsely represented itself as a fully controlled unit of reported audit firm Deloitte & Touche, LLP (“DT”).

Hoary Past

Chinacast Education Corporation (OTCMKTS:CAST) latest run in with regulators and investigative agencies is not a one off episode or of a recent origin. Way back in May of 2012, The Rosen Law Firm had gone after the Shanghai based firm seeking redress on behalf of those share holders who had been impacted in a negative manner when the trading in the stock of the company was suspended due to reports coming out that its then CEO had illegally, without proper instructions and board authorization had managed to transfer close to $120 million from company’s bank account to few of its subsidiaries.

Stock Buoyant

It is interesting to note that this penny stock has posted a 5.7 percent increase in its share price during trading on 17th April. This follows close to 14.8 percent gains it had posted in the past 30 days of trading.